Correlation Between Travelers Companies and Citigroup

Can any of the company-specific risk be diversified away by investing in both Travelers Companies and Citigroup at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Travelers Companies and Citigroup into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between The Travelers Companies and Citigroup, you can compare the effects of market volatilities on Travelers Companies and Citigroup and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Travelers Companies with a short position of Citigroup. Check out your portfolio center. Please also check ongoing floating volatility patterns of Travelers Companies and Citigroup.

Diversification Opportunities for Travelers Companies and Citigroup

0.66

Correlation Coefficient

Travelers Companies  Citigroup

Poor diversification

The 3 months correlation between Travelers and Citigroup is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding The Travelers Companies and Citigroup in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Citigroup and Travelers Companies is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on The Travelers Companies are associated (or correlated) with Citigroup. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Citigroup has no effect on the direction of Travelers Companies i.e., Travelers Companies and Citigroup go up and down completely randomly.

Pair Corralation between Travelers Companies and Citigroup

Assuming the 90 days trading horizon The Travelers Companies is expected to generate 1.45 times more return on investment than Citigroup. However, Travelers Companies is 1.45 times more volatile than Citigroup. It trades about 0.12 of its potential returns per unit of risk. Citigroup is currently generating about 0.12 per unit of risk. If you would invest  433,256  in The Travelers Companies on October 12, 2024 and sell it today you would earn a total of  91,993  from holding The Travelers Companies or generate 21.23% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.36%
Values	Daily Returns

The Travelers Companies  vs.  Citigroup

The Travelers Companies

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in The Travelers Companies are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Travelers Companies showed solid returns over the last few months and may actually be approaching a breakup point.

Citigroup

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Citigroup are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak primary indicators, Citigroup showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Travelers Companies and Citigroup

The main advantage of trading using opposite Travelers Companies and Citigroup positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Travelers Companies position performs unexpectedly, Citigroup can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Citigroup will offset losses from the drop in Citigroup's long position.

The idea behind The Travelers Companies and Citigroup pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

Check out your portfolio center.

Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.